Jan. 18 (Bloomberg) -- American Express Co., the lender that plans to cut 5,400 jobs this year, said profit at its U.S. card business declined 42 percent in the fourth quarter as the firm set aside more money to cover soured loans.
Net income in the segment was $423 million, down from $727 million a year earlier, New York-based AmEx said yesterday in a statement. The company reported the staff cuts and preliminary results, including a 47 percent profit decline and $594 million in after-tax charges, on Jan. 10.
American Express, led by Chief Executive Officer Kenneth I. Chenault, said last week that the largest job reductions will come in travel services as consumers and businesses rely more on digital technology for bookings. The cuts will be spread proportionally in the U.S. and abroad and mostly involve positions that don’t directly generate revenue, the lender said.
“We want to make sure we stay ahead of trends that present both enormous promise and complex challenges,” Chenault, 61, said in the statement. “New technologies are changing the way businesses operate, both online and in the physical world.”
American Express, the biggest U.S. credit-card issuer by customer spending, has climbed 5.7 percent this year to close yesterday at $60.74. The stock advanced 22 percent in 2012.
Fourth-quarter net income was $637 million, down from $1.19 billion a year earlier, as the company took charges tied to severance and changes in how it estimates future redemptions of credit-card rewards, AmEx said last week. Full-year profit dropped 9 percent to $4.48 billion.
The amount of money AmEx set aside in the fourth quarter to cover future loan losses climbed 56 percent to $638 million from $409 million a year earlier, the company said yesterday. Travel commissions and fees dropped 2 percent to $503 million as business travel sales fell 1 percent, according to a financial supplement. International card income slid 38 percent to $95 million.
American Express provides clients worldwide with travel- booking and advisory services. Competitors include Internet firms Priceline.com Inc. (PCLN), the most valuable online-travel agency, Expedia Inc. (EXPE) and Orbitz Worldwide Inc. (OWW)
“The reason that we’ve taken a bigger step in business travel as part of this restructuring is that we now have a new leadership team in place who proposed turning up the dial on our reengineering efforts in response to the changes that we’re seeing in the business landscape,” Chief Financial Officer Daniel Henry said yesterday on a conference call.
Henry was referring to Kim Goodman, the former head of Merchant Services Americas, who took over last year as president of Global Business Travel, said Christine Elliott, an American Express spokeswoman.
The staff cuts account for about 8.5 percent of AmEx’s 63,500-person workforce, a number that will be mitigated as the company refills some jobs, according to last week’s statement. The total number of employees by year-end will drop by 4 percent to 6 percent and American Express expects to hold increases in annual operating expenses to less than 3 percent, the firm said.
Customer card spending, the company’s biggest revenue source, climbed 8 percent to $235.5 billion in the three months ended Dec. 31 from a year earlier even after “a brief dip” in late October and early November as Hurricane Sandy pressured consumers in the U.S. Northeast, the lender said last week. AmEx, which has the lowest rate of soured loans among the biggest U.S. credit-card issuers, said write-offs in the quarter were 2 percent.
Total revenue rose 5.2 percent to $8.14 billion, the company said. Full-year operating expenses climbed 12 percent to $12 billion from $10.7 billion in 2011, AmEx said. Adjusted 2012 operating expenses, which exclude $580 million in costs tied to a legal settlement with Visa Inc. (V) and MasterCard Inc. (MA), rose 8.6 percent.
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